Go to List

India's steel index hits 7 month high; Flats on a stronger wicket

Mills further raise prices, trade segment takes cue Rising global exports indications offer support Secondary longs feel pressure as buyers resist hike Morning Brief: As ...

Finish Flat
By
3300 Reads
6 Feb 2023, 09:09 IST
India's steel index hits 7 month high; Flats on a stronger wicket

  • Mills further raise prices, trade segment takes cue

  • Rising global exports indications offer support

  • Secondary longs feel pressure as buyers resist hike

Morning Brief: As indicated by SteelMint last week, prices did rise again in the week ending 3 February, 2023, pulling up the India Steel Composite Index in tandem. It rose further by 1.7% w-o-w to close at a seventh-month high of 158.20 points (155.60 points in the previous week). This level was last seen on 1 July, 2022. The index has sustained its uptrend for seven weeks in a row.
India's steel index hits 7 month high; Flats on a stronger wicket

The flats index rose a more substantial 2.84% to 158.10 (153.70). Longs, on the other hand, upped a negligible 0.53% to 158.60 (157.40) points w-o-w.
India's steel index hits 7 month high; Flats on a stronger wicket

Factors sustaining the uptrend

1. Prices rise across-the-board: Prices of benchmark items like hot rolled coils (HRCs), cold rolled coils (CRCs), rebar as well structural etc rose at both the mill and trade levels. Mills further raised prices of flats by INR 3,500-3,750/tonne and rebar by INR 1,500/t in the week under review for early February sales.

On cue, trade-level as well as secondary prices too rose across the country.
India's steel index hits 7 month high; Flats on a stronger wicket

Flats boosted by higher export offers, cost push

1. a) Raw material cost push: Prices of steel-making raw materials like iron ore and coking coal have been showing an uptrend for some time now. NMDC Chhattisgarh hiked iron ore prices by up to INR 500/t ($6/t). Prices of lump ores were raised by up to INR 300/t ($4/t) and fines by INR 500/t ($6/t), effective from 28 January, 2023. The Odisha iron ore fines (Fe63%) hit almost an eight-month high at INR 5,750/t ($70/t) in the last week of January.

Weekly average prices of imported hard coking coal (premium HCC, Australian origin) stood at $340/t CNF India over 23-28, January, hitting a two-month high.

1. b) Global export offers rise: Export offers have shown an uptick which is encouraging mills to raise domestic prices too. Indian offers to Europe rose by $20/t. The Chinese traders have, meanwhile, returned to the market post-the Lunar New Year holidays. HRC offers to Vietnam rose by $25-30/t to around $680-685/t CFR against $650-660/t seen prior to the holidays. Offers to the UAE were up by $35-40/t to $720/t CFR compared to the pre-holiday $680-685/t.

Indian mills are closely watching the market in expectation of further increases, a factor that is keeping domestic prices well-supported.

1. c) Imports not viable anymore: Mills are relieved that cheaper imports are a thing of the past. Much of the HRCs were landing in India from Vietnam but the latter increased its offers by $50/t in the current weak, further making such buys unviable.

2. Project segment demand keeps longs supported

Projects absorb hike: Mills and trade segment sellers are confident these price levels will get absorbed by the projects segment since they have to meet their completion deadlines and that enquiries are coming in for orders even at the current elevated levels.

Outlook
The increase in flats prices is sharper at almost 3% compared to longs. It may be recalled the gap between HRCs and rebar had touched a three-year high in December 2022, with the latter being higher than the former, which is unprecedented and not sustainable for a long period. Thus, chances of flats prices rising further is higher while the market expects longs to possibly remain stable or even correct downwards somewhat henceforth, unless exports gain a sharp momentum and pull up domestic longs offers in the process.

Moreover, secondary mills are under pressure. The price rise has failed to find acceptance among buyers, who are staying away due to tight liquidity issues.

The India Steel Composite Index
The India Steel Composite Index is assessed on a weekly basis: every Friday at 18:30 IST, as per the weighted average prices based on manufacturing capacity and production.

SteelMint considers the Composite Index with the base year being 3 January 2020 (financial year 2019-2020) and the base value as 100. The Composite Index does not give the absolute price but a trend of the market. The Indian steel industry is broadly classified into the BF-BOF and the electric/induction furnace routes. Keeping this broad classification in view, SteelMint proposes to release the Composite Index by considering both production routes by manufacturing capacity and the production weighted method to compute the index for India. For details click to view the methodology document.
India's steel index hits 7 month high; Flats on a stronger wicket

 

6 Feb 2023, 09:09 IST

 

 

You have 1 complimentary insights remaining! Stay informed with BigMint
Related Insights
;